Phases of Business Growth and What Lean and Six Sigma Tools to Use

Organizations have seven phases they cycle through and the first four phases are growth phases.

Phase I

New Venture

Phase II

Expansion

Phase III

Professionalization

Phase IV

Consolidation

Phase V

Diversification

Phase VI

Integration

Phase VII

Decline and Revitalization

The reality is that you can use some form of Lean in all elements of the growth. For more information on when to use lean based on growth check out our article on Different Flavor of Lean for Different Industries. The most common place to implement tradition Lean and Six Sigma concepts in phase III. A phase III business is one that needs management systems and ranges from 3.3 Million to 100 Million in revenue depending on if it’s a service or manufacturing business. In this phase you need to develop engagement systems that are scalable like planning, organizing, etc. Traditional Lean and Six Sigma work great when you are in this phase. Why is this important? It’s because a businesses growth typically outpaces its systems. A lot of the traits that got your business to a phase III business won’t make you successful in a phase III business.

Case Study

A 15 million dollar food manufacturer hires a new COO. The COO decides that they need more robust and scalable systems in place. The COO decides to bring in The Lean Way to “Go Lean.” First off the timing is correct for the team however unlike larger businesses they do not have very well defined processes. A concern when starting with this company was that we would overkill a solution. We had to be sure that the systems didn’t out pace the growth. So the first step was to standardize and balance the workload. In fact there are different approaches to Lean and Six Sigma depending on where you are in the growth phases.

Phase

Lean

Six Sigma

I

Lean Start-up

Control Charts

II

Standard Work

Control Charts, DMAIC, Hypothesis Testing

III

Phase II + Jidoka, VSMs, Other standard Lean tools

All Six Sigma Tools

IV

Phase III + Strategy and policy deployment

All Six Sigma Tools

Since the business was in Phase II transitioning to a Phase III business we stuck with standard work. As the organization grows we’ll introduce new more complex tools.